Credit cards have become a way of life for most individuals
and families. The convenience of credit cards has led to
their increased usage and with that increasing credit card
debt. The statistics on the average credit card debt held
by consumers is staggering at nearly $9000 by the average
American said the Consumer Federation of America in a
recent report. Credit card debt is not simply a problem
because of the average amount owed, but also because of the
interest rate charged, which only increases the amount of
debt and makes it much more difficult to pay off. If you
were to pay just the monthly minimum on $9000 of credit
card debt at 18% interest, it would take approximately 42
years to pay off that debt. That's a long time to pay for
that new television you so desperately wanted and probably
don't have after 42 years.
With increased credit card debt, many of us are threatened
by surmounting debt issues and many of us are looking for
solutions besides bankruptcy since in 2047 we probably
don't want to be paying for that now obsolete and probably
non-existent television we bought way back in 2005. One
possible solution is debt consolidation.
How can debt consolidation help with credit card debts?
While there are several ways to go about debt
consolidation, if you are not quite in a position where you
need a debt counselor and debt management plan and your
credit is still in good shape, you may be able to
consolidate your credit card debt with a bank loan or
transfer your credit card debt to a lower interest credit
card. The benefit of both is that you only have one monthly
payment to make and the interest rate is usually
substantially lower. If you transfer your debt to a lower
interest credit card, you need to exercise some caution,
though. Some credit cards offer special interest rates when
you do a balance transfer, but this lower interest rate may
not always be fixed until you pay off the debt. It may only
last a few months and then the rate goes right back up. If
you go this route, managing your debt may be easier than if
you have to pay to several lenders, but much more difficult
than if you were to consolidate with a single loan because
you need to continually calculate interest rates and how
they will affect your credit card debt.
Here's an example of how obtaining a lower interest
consolidation loan or transferring to a lower interest
credit card can affect your credit card debt:
Let's say you have $1000 in outstanding credit card debt
with an average (APR) of 18%. If the outstanding balance
remains at $1000, over the course of a year you would pay
approximately $180 in interest charges alone. If you
consolidate your credit card debt into a single loan with a
lower interest rate or if you do a balance transfer onto a
credit card with a low interest rate you would save a
significant amount of money.
If the new loan or credit card have a 9% APR, the amount
you pay in interest charges would be half of the higher
interest cards meaning you would save roughly $90 in
interest charges over the course of that same year. If you
save $90 for a debt of $1000, then think about a debt of
$10,000. You will save about $900 just in interest alone
and pay down the debt that much quicker.
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For more ways on how to save money and manage your debt, go
to http://www.creditmanagement101.com
The author runs http://www.creditmanagement101.com - a
website dedicated to issues concerning debt and credit
management. Learn about responsible credit management, your
credit score, debt management plans and credit counseling.
Also find ways to save your money by maintaining a livable
budget that reflects your means.
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